Chanos Turns Bullish On US Sports Betting Stocks


Posted on: December 18, 2023, 03:00h. 

Last updated on: December 17, 2023, 08:20h.

Citing exotic wagers that capitalize on the deficiencies of US sports bettors, famed short seller Jim Chanos is now bullish on sports wagering equities.

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Kynikos Associates founder Jim Chanos. He’s no longer short DraftKings and is now bullish US sports betting stocks. (Image: CNBC)

Kynikos Associates founder Chanos, who recently announced the conversion of his hedge fund to a family office structure, announced a short position in DraftKings (NASDAQ: DKNG) in December 2021, calling the operator’s business model “flawed.” His firmed initiated its DraftKings short in May 2021 and covered it in July 2022, netting a $10 million profit in the process. That was a smart move because shares of the sports book operator have nearly doubled since Aug. 5, 2022 and have more than tripled on a year-to-date basis.

Chanos saw the light on sports wagering equities, telling The Financial Times he “underestimated” the degree to which US bettors are “bad” at sports wagering. Additionally, the short seller observed that gaming companies such as DraftKings discovered a margin-boosting opportunity via exotic, long-odds wager that lured bettors searching for big paydays.

Chanos Mentioned In-Game Bets, Same-Game Parlays

DraftKings and rivals such as BetMGM and FanDuel have been able to bolster margins and increase profitability through offerings including in-game, or live, bets and same-game parlays.

For years, US sports bettors preferred to place pre-game wagers on money lines, sides or totals, but they’re increasingly embracing in-game wagers. That’s not necessarily good for their accounts, but it is a positive for operators. In nearly all major team sports, in-game odds can shift on a play-by-play basis — a touchdown, a home run, etc. Those fluctuations typically play into the hands of the house, not bettors.

Likewise, same-game parlays are gaining traction among US bettors. Typically, a same game parlay lives up to what’s being implied: A multi-leg wager on the same event. In a hypothetical example using a football game, a bettor could pick a moneyline wager, an anytime touchdown by a particular player, and an over/under on a wide receiver’s yards.

Chanos told The Financial Times that in-game bets and same-game parlays subject bettors to terrible odds for clients, but also highlighted a better-than-expected business model for operators. FanDuel and DraftKings, which have a duopoly in the US sports wagering markets, are among the gaming companies that have found emerging gold mines with same-game accumulators.

There’s room for significant live wagering growth in the US because, by some estimates, such bets account for a quarter of handle today. However, in more advanced sports betting market, such as continental Europe and the UK, the percentage can be as high as 80%.

Chanos Didn’t Tout Specific Gaming Equities

Over the course of his career, Chanos was never shy about mentioning by name the stocks in which he held short positions, but in the interview with The Financial Times, he didn’t directly identify a sports wagering equity on which he is bullish.

DraftKings is the largest pure-play name in that group currently trading in the US, but FanDuel parent Flutter Entertainment (OTC:PDYPY) will list on the New York Stock Exchange (NYSE) next month. Those could be the types of stocks Chanos uses to participate in US sports wagering bullishness, but he did not confirm as much.

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